-Funding level drops to 62.2%
-Deficit between benefits payments & contributions estimated to be $565.5 million.
-Actuary recommends increasing state contribution from 12.93% to 14.26%
-Link to report
The latest actuarial report for the Mississippi Public Employees Retirement System states the funding level dropped to 62.2% and recommends increasing the state contribution to 14.26%.* PERS received more scrutiny over the last year after its funding level decreased and Governor Barbour's created the PERS Study Commission.
The report states PERS has assets of $20.3 billion. There are 161,676 active members and 83,115 retirees. The state currently contribution rate is 12.93% but the actuary recommends raising it to 14.26% of "active members compensation". The state contribution increased from $411 million in 2001 to $781 million in 2011 (p. 22).
The same report stated the funding level fell from 64.2% in 2010 to 62.2% in 2011 (p. 20). The unfunded actuarial liability increased from $11.2 million in 2010 to $12.3 billion in 2011 - an increase of $1.1 billion. Keep in mind PERS has assets of over $20 billion, more than enough to meets its liabilities. The funding level refers to future liabilities.
The often-ignored factor when discussing PERS is the comparison between benefit payments and contributions. The system had a deficit between payments and contributions in 2010 of $410 million. The deficit increased to $565.6 million in 2011 (Page 28. Subtracted contributions from Benefit payments. Did not include investment and administrative expenses.). However, PERS enjoyed investment income of $4.2 billion in 2011 as it earned a 25% rate of return (The rate of return is a -11% for the last three months as the markets declined.).
What is real interesting is the table on page 17- cash flow projections. The report expects the difference between contributions and benefits payments to increase to $525 million in 2014, $675 million in 2017, and $884 million in 2021 - a doubling of the current annual deficit in ten years.
Note: It should be pointed out SLRP has an ending balance of $13.7 million (funding level of 73%) and the Mississippi Highway Safety Patrol Retirement System had a balance of $277 million (Funding level of 67%)
*Here are some basic facts about PERS according to its most recent audited financial statements and Executive Director Pat Robertson's comments at a May luncheon videotaped by this website. I include this in every post about PERS so the reader can have a basic foundation to understand PERS. All figures are based on the financial statements for the year ending June 30, 2010. READ THIS BEFORE YOU READ ANYTHING ELSE.
Employees: 165,644
Average years of service is 31
Average age is 59.
Asset allocations:
47.8% in US equities
25.4% in debt securities
4.6% in real estate
19.5% in non-US equities
Total assets: $21.2 billion on May 1,2011, $17.1 billion in 2010 ($15.5 billion in 2009, $19.7 billion in 2008).
Investment rate of return: 14.1% for 2010.
3-year rolling average: (5.5%)
5-year rolling average: 2.1%
10-year rolling average: 2.3%
20-year rolling average: 7.4%
30-year rolling average: 8.7%
Investment performance since 2000:
2000: 8.4%
2001: -7.1%
2002: -6.6%
2003: 3.5%
2004: 14.6%
2005: 9.8%
2006: 10.7%
2007: 18.9%
2008: -8.2%
2009: -19.4%
2010: 14.1%
Current funding level of actuarial accrued liability: 64.2%. Ms. Robertson said 80% is considered to be the "benchmark of a well-funded plan." Ms. Robertson stated at the May 3 luncheon PERS' accrued liabilities have doubled since 1998 (thanks to the legislature's increase in benefits in 1999 with no additional improvement in "funding mechanisms"). 2010 audited financial statements
Page 8 of the 2010 audit states PERS spent $409 million more in benefits payments than it received in contributions although that does exclude the $2.1 million income from investments. PERS lost $3.7 million in investment income in 2009.
Earlier PERS posts:
Video & Reports from October Investment Committee Meeting
PERS charts
PERS budget hearing
PERS Commission hearing
August PERS Investment Committee video and reports
Resolution to study PERS passes
SLRP fund has over $11 million
What is SLRP?
17 comments:
A few years from now when PERS blows up, people will find these posts and wonder why no one paid attention to this Kingfish guy pointing out the problems back in 2011.
PERS reform will always be a difficult political issue, just like reform of Social Security is a third rail for national politicians, but numbers like these clearly indicate that either the stock market needs to get to 15,000 or so or significant reform needs to happen. and not just for future employees and retirees. It's going to take a unified effort from the governor and the legislature to change it, which means that it will be broke at some point because no one who wants to stay in elected office will want to be the first to stand up and suggest changing the system. Good luck - I'm glad my future doesn't depend on PERS. Bill Billingsley
Maybe we'll luck out and the Pat Robertson homer will show up to spin about her competence and outstanding leadership.
This is a disaster waiting to happen. The unfortunate thing is those who are counting on receiving the funds are also the ones wanting to maintain the status quo while sticking their heads in the sand with regards to the reality of the PERS economic situation.
Reform of some sort will have to take place. If it doesn't I fear the entire thing is destined for the scrap heap and a lot of retirees are going to go hungry.
The harsh reality is they are going to have to give up something at this point. The continued slide into the abyss per the Actuarial Report will require a sacrifice somewhere and probably in multiple areas (benefit cut, increase in contribution, decrease in benefit computation).
I'm with Bill on this one, I too am happy my future does not rest on the success of PERS. Unfortunately all citizens of MS will be impacted if they raise taxes to pay for the shortfall.
Was it PERS that was scammed out of 12Million by a India Ponzi scam by going around US security banks and buying directly into the scam. Did not read this in a Mississippi paper but in the NYTimes. Nah, probably some other State since we could never ever be this stupid.
Want to post a link to that story Anon?
I saw a monster.com job opening with PERS for an actuarial planner. Perhaps some of you should take it.
Kapt, AG Hood is lead in the suit and I'm not spending anymore energy on it. It did come to light in the NYT's in '09 and you can do the research. I'm not in PERS but those that are need to know what happened.
I wasn't being rude. I looked for it and a ton of India Ponzi scheme spam came up even when I searched site specific. Will continue to look, thanks for the heads up.
It happened.
Given the report and the reflected shortfall in funding, $12MM is a drop in the bucket. In my mind the situation of investing in a Ponzi Scheme, in this instance, is more reflective of management's inability to keep watch.
K'Roo; Can you name one investment, retirement or government dole program (including and particularly SS) that is NOT a Ponzi scheme?
11:40PM You and I are not in disagreement re: government run entitlement programs. And, note my comment referred to a 2009 investment resulting in a $12MM loss reported in comments previously.
From a financial perspective, there are arguments for and against the ability to maintain solvency for these types of programs.
I just want to say in regards to SS, one of the biggest problems was the raiding of the trust fund by government to pay for other programs. That in and of itself is where the "ponzi" application truly begins to apply. If it were originally set up to benefit only retirees (as intended) then it would probably, given the size, be managed to a level of solvency where we would not be so concerned.
In the case of PERS, the performance results are abysmal. I was going to pour through the docs on the site last night, but I have been fighting a cold and did not do so.
Yep...fewer people contributing as government cuts jobs, investors can't count on getting accurate information, the economy is in the tank everywhere...
It ain't just PERS that's in trouble.
Maddoff and Ackman proved even smart and financially successful investors can be duped as rich folks clamored to have those guys manage their investments. Indeed, you had to have a big minimum to invest. A first rate con artist wants to pick up the big bucks, not us little investors.
I'm just surprised that anyone's surprised that PERS is in trouble.
I guess I'm the " homer". If I REALLY were guilty as accused, I'd tell Robertson to retire TODAY. I'd say, "Why stay where you aren't valued and expectations are unrealistic when you can get full retirement? Let someone else take over. The newbie will either make you look good or be so good, you'll be forgotten quickly."
You should be either 1) more clear or 2) less cryptic as to:
I guess I'm the " homer". If I REALLY were guilty as accused, I'd tell Robertson to retire TODAY.
Sadly, Robertson told some members of the legislature the other day that they haven't even run stress tests based upon the 10-year returns.
There are a lot of people who retire and go back to work part time. So they are collecting benefits and not contributing to the system.
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